AVJennings could be lost to the share market as global PE group Proprium Capital Partners lobs takeover

High-profile home builder and developer AVJennings has received a hefty takeover bid as it deals with unhappy shareholders after a tough year.

A NSW retail development site in an AVJennings master planned community in Warnervale.

High-profile home builder and developer AVJennings could be lost to the share market as global private equity real estate group Proprium Capital Partners and its local residential development business Avid have swooped with a $377m takeover bid that is more than double its trading price.

The play by Proprium and would see the ASX-listed company taken private at 67c per share, just over double the 33c at which it closed on Wednesday, and one of the largest premiums offered in a property takeover. AVJennings shares jumped 29c to close at 62c on Thursday on news of the bid.

The move comes amid unhappiness among shareholders about the company’s longer-term performance as AVJennings fell to a $1m profit last year after writing off the costs associated with a soured land acquisition.

Shareholders including farmer and activist investor Lynn Brazil, who has a stake of about 6 per cent, were also unhappy about the company undertaking a deeply discounted $30m capital raising last year and had proposed a board shake up.

AVJennings chairman Simon Cheong told the company’s annual meeting, held on Thursday, that the takeover proposal was subject to a number of conditions including due diligence and entry into a Scheme Implementation Agreement.

AVJennings has a 90-year history of home building but already has Singapore’s SC Global holding a controlling stake since 1999. The company has a pipeline of 9, 871 lots under its control and it said at its results that acquisition activities were expected to remain scaled back until overall market sentiment, and buying conditions generally, improved.

The Proprium proposal, which puts an enterprise value on the company of about $584m, is non-binding and indicative but once confirmed would see Proprium acquire AVJennings via a scheme of arrangement.

AVJennings directors are backing the proposal, saying it would provide shareholders with an opportunity to realise their investment in the company.

AVJennings has struck a deed with Proprium, which was spun out of Morgan Stanley’s real arm and also owns local commercial properties, so it can have exclusivity while working to finalise its proposal.

Also involved is Avid, already one of the top privately held residential developers in Australia. It has a portfolio of projects that include land estates, resorts, and completed homes and apartments, with a pipeline with an end value of about $5bn, and would combine well the AVJennings operation.

Avid is owned by the Proprium Real Estate Special Situations Fund and has a portfolio spanning about 45 projects in Queensland, Victoria and NSW. It expanded in May by acquiring a series of land lease estates from the Puljich family-owned Living Gems portfolio.

Under the bid for AVJennings, the listed company could pay a fully franked special dividend on or before the scheme date, which would give shareholders an additional value of up to 6c per share in franking credits. The takeover deal would be subject to both a unanimous board recommendation and an independent expert’s report.

AVJennings directors are backing the proposal, saying it would provide shareholders with an opportunity to realise their investment in the company at a price significantly above its historical trading levels with certain value due to its all cash nature.

The takeover plan has been quietly worked on since July when AV Jennings receives a confidential non-binding offer from the global company with confidentiality a condition of the preliminary offer.

Since the initial approach there have been extensive talks, resulting in the offer being bumped up to 67c per share. Investment bank Barrenjoey is advising AVJennings.

Mr Cheong told the annual meeting the directors intend to recommend the proposal, subject to no superior proposal emerging. He said the last year had been challenging

as Australia’s residential property sector continued to experience macro-economic challenges, including high interest rates and inflation, significantly impacting buyer sentiment and affordability.

Property developers were also exposed to labour shortages and above average wage inflation while materials inflation is showing signs of normalisation. But beyond the shorter-term challenges, supply and demand fundamentals for the housing market continue to be strong, underpinned by the existing undersupply of new housing stock and population growth, Mr Cheong said.